Mar. 15, 2001 - Stock markets have trapped investors in a game of limbo, leaving them asking, day after day, "How low can it go?"

For the past year the tech-heavy Nasdaq has driven investors to their knees. And now that market's grandpa, the Dow Jones industrial average, is lowering the bar. The Dow fell 317.3 points, breaking through the 10,000 level the index passed two years ago with great fanfare.

The nation's blue-chip companies are down 7.5 percent on the year. A week ago the index was still positive on the year.

"I worry about where the bottom is," said Aurora resident Francis Hopkins. But the 77-year-old isn't so worried that he is calling it quits. He sees an opportunity.

"I would like to take a fling at the bottom," said the retired Navy pilot. Hopkins said he doesn't have cash left to invest but is toying with borrowing money to buy stocks.

Hopkins may have to wait for the markets to bottom out, though. Sam Jones, a technical analyst and president of Denver-based R.E. Jones & Associates, said investors should gird for another month or two of downward volatility.

"I don't like to sugarcoat it when it's ugly, and it's definitely ugly right now," he said.

Jones said the Dow has been testing the bottom of the past year's trading range but may not yet have hit bottom.

Based on the patterns he sees in the market, he said the Dow could fall another 200 to 300 points, to a level of about 9,700, before gaining some upward momentum.

Mark Simpson, a market analyst with A.G. Edwards, said the markets have entered an irrational period.

"When it hits the emotional phase, there is no point in predicting where it will end," he said. Technical analysts such as Jones and Simpson use the terms "support" and "resistance" to describe where stocks meet friction on the way up - resistance - and where they have a floor on the way down - support.

Another way to think of support levels are as bulkheads on a ship: As one area takes on water, which can cause the ship to sink, sailors try to seal it off and head to a safer level. The difficulty is that no one knows how big a hole a slowing U.S. and now global economy will rip in equity values.

Simpson's next support level is at about 9,500 on the Dow, and then at 9,000. When stocks and indexes break out of their ranges, it can be a long ride up, as in late 1999 and early 2000, or as in the past six months, a long ride down.

The market broke through two key measures this week: 2,000 on the Nasdaq and 10,000 on the Dow. For some investors, those levels represent psychological markers of severe damage.

"Investor psychology is fragile right now," Simpson said. "When people lose a lot of money they walk away from the markets and don't come back for a long time."

Those who don't sell at the bottom and face their losses will often sell as soon as a stock or market starts to rebound. That, however, caps a market's ability to bounce back.

Jones described Wednesday's sub-10,000 close in the Dow as a "retesting" of the bottom that was reached in March 2000, when the Dow closed at 9,796, and in October, when the index fell to 9,975.

"I'm not going to say this is the bottom, but I will say we're at a buy point," Jones said. "We should start to see some buying activity in the market."

Many financial planners argue, however, that timing bottoms is a fruitless exercise.

Ned Sundermann, a Denver money manager and president of Sundermann Capital Management, said he prefers not to ponder the question of how low the market will go.

"Nobody knows where the bottom is. I don't know. (Federal Reserve Board Chairman) Alan Greenspan doesn't know," he said. "People are focusing on the wrong question. The question is, "What can your portfolio deal with?' and the answer to that is different for everybody."

For example, Sundermann said, he would advise older clients nearing retirement to take defensive mechanisms, such as selling some of their stocks and moving more assets to cash and bonds.

Younger investors, he said, have more time to recover from the market carnage and can take the risk of sticking with equities, even if the market continues to fall.

"You can't time the bottom," said Richard Johnson, associate professor of finance at Colorado State University in Fort Collins. "Performance is much better if you invest on a steady basis."

But many investors can't help asking how low can it go, not only of the markets, but of their portfolios and of their resolve.

If the bar gets too far down in the game of limbo, expect more people to drop out and call it quits. But that needs to happen before the bottom shows up, market watchers said.

The bottom will be when the last seller calls it quits and the buyers return. Then the bar starts moving up again, and the market cycle starts all over.

"On Thursday, anything can happen," Simpson said. "You can't rule out anything. We do know it will be volatile."

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